What is Going to Happen if Europe Bans Palm Oil in 2030?

The meeting between Parliament, the Council and the European Commission led to a compromise regarding imports of palm oil from Indonesia and Malaysia. On June 14th 2018, the three parties agreed to provide additional time for Indonesia and Malaysia. The content of palm oil in biodiesel production will only be completely banned in 2030. Previously, the European parliament has decided to ban the use of palm oil for biodiesel in 2021.

Palm oil imports have provided broad benefits to the European Union for decades. The presence of palm oil in the European Union does not eliminate the demand for rapeseed oil or sunflower oil because it is needed as a blending in CPO consumption. For Europe that has been facing land scarcity, the presence of CPO will also prevent excessive and concerning expansion of rapeseed and sunflower plantations that will undermine the land used for other food supply (OECD / FAO, 2007). The EU community also benefits from the presence of CPO because then people can enjoy the price of composite vegetable oil which is cheaper than if there are only rapeseed oil and sunflower oil available.

The presence of palm oil also reduces fuel-food tradeoff problems faced by developed countries including countries in the EU. According to OECD analysis (2007) if the EU reduces only 10 percent of fossil fuel consumption and replaces it by biofuel (as stated in the EU energy directive) the European Union must convert 70 percent of its agricultural land to plant crops for vegetable oil. Meanwhile, to substitute 10 percent of diesel with soybean-based biodiesel, the USA must convert 30 percent of its agricultural land to soybean gardens, and by doing so it will disrupt the food security of the USA and EU or even the global nation. With the availability of palm oil internationally, the program of substitution of renewables for fossil fuels with biodiesel can be carried out by the European Union and the USA without converting their agricultural land. This has been confirmed for the European Union where roughly 38 percent of EU palm oil imports are used for both biodiesel and electricity.

In addition, the availability of palm oil in developed countries also creates economic benefits to the importing countries. For example in the EU, it has increased EU’s GDP by 5.7 billion euros, created government revenues of 2.6 billion euros and helped creating employment opportunities for 117 thousand people.

So what is going to happen if Europe really puts a stop to palm oil? First of all, by not importing palm oil, the European Union is going to be threatened with the fact that they will no longer getting substantial annual economic benefits from palm oil.

Secondly, they may have to replace palm oil by increasing rapeseed oil and sunflower oil production both in the EU and in other European regions (outside the EU). This means that the area of ​​sunflowers and rapeseeds plantations must be expanded. Rapeseed oil and sunflowers oil production is only around 0.5 ton per hectare, thus in order to replace 10 million of palm oil imports, 20 million hectares of new land is needed to plant sunflower and rapeseed crops. They will have to conduct a large scale conversion of European forest (deforestation).

Thirdly, they might replace palm oil imports by increasing imports of other vegetable oils such as soybean oil from South America. If the EU chooses the second option, then they will have to replace 10 million tons of palm oil that requires an expansion of 20 million hectares of soybean (or other biofuel crops). This means increasing the conversion (deforestation) of the world’s forests by 20 million hectares.

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